Oil Production Vital Statistics November 2015

The day of reckoning has arrived for the oil price with the head and shoulders pattern I have been tracking for two months finally completing in recent weeks. It became a rather drawn out affair with markets awaiting the outcome of the OPEC meeting of 4 December. In the event, OPEC elected to stay the course and did nothing. With WTI closing at $40 and Brent on $43 on Friday both are testing support levels. WTI in particular has had strong support at $40 in recent weeks. Should this support be broken then another major down leg is to be expected to the vicinity of $20. I can see nothing in the numbers presented below to provide hope that $40 may hold. The market remains over-supplied and awash in oil. Lower price is required to remove supply from the market.

    • World total liquids production up 240,000 bpd to 97.09 Mbpd, a new record high.
    • OPEC production down 20,000 bpd to 31.72 Mbpd (C+C)
    • N America production up 260,000 bpd to 19.66 Mbpd.
    • Russia and FSU up 90,000 bpd to 14.01 Mbpd
    • Europe down 10,000 bpd to 3.40 Mbpd (compared with October 2014)
    • Asia down 50,000 bpd to 7.99 Mbpd.
    • Middle East rig count is rising. The international oil rig count is stable. The US oil rig count is falling.

Figure 1 The oil price has trended down this month in a saw tooth pattern to support levels and to complete the head and shoulders pattern. Friday’s close was just above the near term lows of  $38.22 for WTI and $41.59 for Brent, both on August 24th. If these lows are broken traders and companies should be prepared for a plunge.

The October 2015 Vital Statistics are here. EIA oil price and Baker Hughes rig count charts are updated to the beginning of December 2015, the remaining oil production charts are updated to October 2015 using the IEA OMR data.

Figure 2 The bigger picture shows how the second shoulder has already breached the long-term trend line and the chart appears to be very bearish. Chart patterns alone do not tell the whole story, but it is difficult to find ANY near term bullish indicators in the production and rig count data.

Figure 3 The US oil rig count has resumed its fall but at a lower pace than the plunge post-October 2014. The blip represents 675 rigs on 28 August and has since fallen to 545 oil rigs on 4th December, a fall of 130 rigs in 14 weeks. At this rate the 200 count will arrive in 38 weeks, sometime in September 2016. A fresh plunge in the oil price may accelerate this process. 545 rigs still drilling, used to drill better wells in sweet spots, is sufficient to substantially offset declines which is why US production is trending down only slowly. In my analysis of US Shale Oil: drilling productivity and decline rates (June 2015) I forecast that LTO production would fall 830,000 bpd with about 630 rigs drilling. The fall in US production so far has been 540,000 bpd. A large backlog of drilled and uncompleted wells complicates this picture.

Figure 4 This expanded scale shows that the rate of decline in US oil directed drilling is muted compared with the big drop seen earlier this year. Gas drilling has flatlined at around 200 units. The total rig count was 737 on 4 December compared with a post-crash low of 876 seen on 20 June 2009. Hence, the current drilling slump is already worse than the post-crash slump and there is no respite in sight.

Figure 5 The near-term peak in US production was 13.24 Mbpd in April 2015.  The October figure was 12.70 Mbpd, down 540,000 bpd from that peak. US oil production has been amazingly resilient in the face of the collapse in drilling. In recent post, Art Berman points out The Problem With Oil Prices Is That They Are Not Low Enough. And that’s why I believe that another plunge in the oil price is required to thrust a dagger through the heart of US shale drillers and the banks who have supported them. To be clear, low oil prices are wonderful for the US economy and a nightmare for OPEC.

Figure 6 OPEC production stands at 31.72 Mbpd down 20,000 bpd on September which is effectively unchanged. This level was first attained in the summer of 2008, at the end of the great energy squeeze in the lead up to the financial crash. This appears to define a plateau level in OPEC production. There has been very little action in the OPEC producers, all pumping flat out, pouring gasoline on the bonfire of oil wealth destruction. Iran is waiting in the wings to introduce a further 720,000 bpd (IEA) when / if sanctions are lifted early 2016.

Figure 7 OPEC booked spare production capacity stands at 3.18 Mbpd with 2.01 in Saudi, 0.72 in Iran and 0.45 in the rest. One has to be sceptical about Saudi Arabia’s 2 Mbpd and OPEC, with the exception of Iran, is pumping flat out. There is of course degraded and unused capacity in Libya.

Figure 8 In October Saudi production rose by 50,000 bpd to 10.23 Mbpd. NZ = neutral zone which is neutral territory that lies between Saudi Arabia and Kuwait where production from the Wafra heavy oil field is now effectively zero.

Figure 9 The ME OPEC oil rig count is on a rising trend with operational cycles superimposed. In October, ME OPEC rig count began inching up once more with the main action in UAE that added 8 oil rigs. This is a sure sign that ME OPEC are pumping at capacity and need to drill new wells to cancel declines and to maintain plateau production. This also underlines the determination of the big ME OPEC producers to maintain production levels that is BAD news for the OECD producers and Russia.

Figure 10 The international oil rig count has been stable for 6 months. Total international rigs are down 17 to 854. This number is still substantially above the 2008 peak of 832 units (dashed line). While the international oil industry is racking up huge losses, the level of drilling activity still exceeds the previous high of 7 years ago. I suspect that the pause in the fall will shortly reverse as it did in the USA and we will see many more rigs layed up in the first half of 2016.

Figure 11 Russia and other FSU produced 14.01 Mbpd in October, up 90,000 bpd on September but little changed for 3 years. 

Figure 12 The cycles in European production data are down to summer maintenance programs in the offshore North Sea province. To get an idea of trend it is necessary to compare production with the same month a year ago. The dashed line shows that European production has been essentially flat for three years. The post-peak declines have been arrested. Compared with Oct 2014, European production is down 10,000 bpd to 3.4 Mbpd. Declining North Sea production was one of the drivers behind the rise in oil prices since 2002. Arresting and reversing those declines has removed that driver.

  • Norway Oct 2014 = 1.93 Mbpd; Oct 2015 = 1.91 Mbpd; down 20,000 bpd YOY
  • UK Oct 2014 = 0.88 Mbpd; Oct 2015 = 0.95 Mbpd; up 70,000 bpd YOY
  • Other Oct 2014 = 0.60 Mbpd; Oct 2015 = 0.54 Mbpd; down 60,000 bpd YOY

Figure 13 This group of S and E Asian producers has been trending sideways since 2010.  The group produced 7.99 Mbpd in October, down 50,000 bpd on the revised September figure.

Figure 14 N American production looks like it topped in April at 20.12 Mbpd:

  • USA Sep 2015 12.73 Mbpd; Oct 2015 12.70 Mbpd; down 30,000 bpd
  • Canada Sep 2015 4.08 Mbpd; Oct 2015 4.35 Mbpd; up 270,000 bpd
  • Mexico Sep 2015 2.59 Mbpd; Oct 2015 2.61 Mbpd; up 20,000 bpd

Group production up 260,000 bpd from September to 19.66 Mbpd in October. Group production down 460,000 bpd from the April peak. Canadian production dipped in September but bounced back in October.

Figure 15 Total liquids = crude oil + condensate + natural gas liquids + refinery gains + biofuel. October production was 97.09 Mbpd up 510,000 bpd on the revised September figure.  The October figure sets a new global production record, up 10,000 bpd on the prior July 2015 high. Global production remains 3 Mbpd above the 2004-15 trendline and has a long way to fall to restore balance to the market.

Figure 16 This great chart from Art Berman brings it all together. The oil price crash is simply explained by supply and demand. What we are witnessing is “unprecedented” over supply. Huge supply growth momentum was built during the era of record high price that also acted as a drag on the global economy. Low price will at some point result in the situation reversing and the price will turn very quickly. Predicting when that will happen is gold dust. But before that can happen, the production momentum needs to be switched off and I dare say that requires sharply lower oil price in the near term.

Concluding Comments

After a year of “Oil Price Crash” in October the world managed record production of 97.09 Mbpd. Production momentum built in the period of high price, 2007 to 2014, is proving very difficult to switch off. It must be switched off and it seems to me the most likely scenario is sharply lower oil price in the near term. The geo-political backdrop also has mounting hazards and uncertainty with the USA, Russia, The UK, France and Germany all operating in the same combat arena, chasing a phantom menace.

Previous Editions of Vital Statistics

January 2015
February 2015
March 2015
April 2015
May 2015
June 2015
July 2015
August 2015
September 201

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35 Responses to Oil Production Vital Statistics November 2015

  1. Hugh Sharman says:

    Thank you once again Euan!

    In relation to global oil consumption of 96 million bopd, the massive price swings caused by comparatively trivial surpluses and deficits is striking.

    As a matter of interest, are other commodities price-affected by such tiny, some might say trivial, fractions in global supply/demand imbalances?

    • gweberbv says:

      Here you go: http://investmenttools.com/futures/bdi_baltic_dry_index.htm (freight rate index for container ships)
      This is roughly your demand: https://www.wto.org/images/img_mews/press721/press721_chart4_e.png (worldwide exports)
      This is your supply: http://www.emsa.europa.eu/implementation-tasks/equasis-a-statistics/item/472.html (found no better source, so here I write down the numbers for the available gross tonnage: 2014 -> 1,166,000; 2013 -> 1,094,000; 2012 -> 1,048,000 … 2008 -> 833,000 … 2006-> 729,000)

      Undersupply in transport capacity from 2004 to roughly to 2010 lead to a surge of new container ships. Now more than 30% of the available gross tonnage is only 0-4 years old. Only about 6% is older than 25 years, where you would expect the ships to get outphased. No shipowner is making profit anymore. Still the banks are rolling over the debt from year to year – being backed by the governments.

    • Alan Rayner says:

      I am a resident of El Hierro and I would like to contribute to the discussion about the GdV
      scheme on this island. Unfortunately I cannot locate a means to comment on the blog
      regarding the October 2015 conclusions and so I trust that I may be excused for making
      this off-topic request here for information as to how to make contact.

      • Euan Mearns says:

        Hi Alan, Comments are normally closed after 21 days. I’ve changed the setting to 45 days for the time being. You can comment on the October 2015 update, but I’d advise that Roger Andrews is away this week. But we would certainly like to hear what you have to say.

      • Flocard says:

        To Alan Rayner
        I believe Euan has reopened the site of last Roger-Andrew’s post on El Hierro and Gorona del Viento for you.
        I’ll be checking it for your contribution.
        Indeed I am very much interested by any new comment you can make with the specific access to information of one resident of El Hierro.
        Hubert Flocard

    • Euan Mearns says:

      Hugh, its a curious way the market works. In times of scarcity it depends how badly individuals want the commodity. If you want to secure your supply you bid more than the competitor. And if you think the price is going up, you may buy more today than you need. Much of the bidding up was done using borrowed money. And when the bubble burst, certain countries lost their bidding power – PIGS et al.

      At the times of surplus, the opposite happens. If your stock tanks are full and you think the price is going to fall you wait to buy tomorrow.

      The supply side should ideally be responsive to price signal but one thing I’ve learned is that there are long time lags. It took a long time to bring on new supply at the time of shortage and now its taking a long time to shut off supply at the time of plenty. The market could / should of course be regulated. OPEC did that job. With stacks of new conventional projects being rolled out, a stack of drilled but not completed wells in USA and storage full to gunnels, I’m more than a little concerned that this could get very ugly.

  2. Flocard says:

    Question from someone without any knowledge of this kind of market (of any market in fact)
    Your write
    “The market remains over-supplied and awash in oil. Lower price is required to remove supply from the market.”
    If the prices are low it is because the real economy has no use for the present large flux of oil. The price or oil is low enough not to be anymore a hindrance for the industrial activity. If this activity remains at a low it must be for other reasons than the price of oil. In addition somewhere(other post) you wrote that Oil-stock reservoirs are full all over the world.
    Thus, I do not see how a lowering of price will remove oil surpluses from the market. Only the death of some producers will. May be this is what you have in mind ?

    • gweberbv says:


      even if a producer goes bankrupt, the well is still there and can be taken over by a new operator. Paying in the worst case 1 symbolic dime for it (happened with a lot of PV producers and is one of the reason behind the fall in prices). The revenue has to go below a level, where it is impossible to pay the electricity bill. The salaries seem no problem (if it is correct that some workers start with 60 to 80 thousands a year), just cut them by half.

    • Euan Mearns says:

      Hubert, the world is producing about 97 Mbpd (not all oil). These flows are always in natural decliine – lets assume 5% for the global figure. That means every year 4.9 M bpd of new supply needs to come on line. This is a massive and continual under taking. That is what is required to keep production constant. The boom has led to that figure being closer to 7 to 9 M bpd added per year taking into account production growth and over-supply that goes to storage.

      What needs to happen is for 2 to 3 M bpd to be removed from the market. OPEC + Russia could if they wanted to do that overnight. But instead we have the perverse reaction where many producers, confronted with losses are pumping flat out. The reduction in LTO drilling in the USA will eventually see US production fall a lot further, but it might take another year or more. Else where, companies will cancel projects that would deliver oil in 3 to 5 years time. But all projects that are underway will be completed, continuing to pour gasoline on the fire.

      There has been very little take over and merger activity. The big guys are still sitting tight. But if oil is $30 a year from now, there will be carnage among the over leveraged small to medium sized companies.

  3. gweberbv says:

    Food for thought: You get money for nothing (zero interes rate) and energy (nearly) for free. Still economy is not skyrocking. Something seems to be broken.

    • Euan Mearns says:

      A financial singularity. Growth founded on ZIRP and debt and once debt can no longer expand you are in a vice. And there was the one off shot of morphine from China. If demand weakens then it awful news for oil industry.

      • Chinese demand is up 800,000 barrels per day YOY in what people call a “recession”. India’s demand is up 300,000 barrels per day YOY in what people call “recession”. And total OECD inventories fell In October when IEA calls for a 2 Million barrel surplus. We will see $95 in 18 months.

        • Florian Schoepp says:

          I fully agree. On another blog, I predicted 31 USD back in early September. I now believe that it could even go to 25. But that will be it. If it goes that low it will only last a few days. My best guess as to when, is mid January.

        • Euan Mearns says:

          We only have history to tell us about the future.


          In this post I observe that in 1998, oil went below $20 (US2014$) and that’s why I think its possible to repeat. Might even go to range 15-20. One thing I agree with is that a plunge like this will be short lived.

          And the probability of events taking over is rising and then all bets are off.

          PS – the chart is annual average, so short term price could go way lower than $20

    • E.M.Smith says:


      Bad Fiscal Policy (spending $ billions on the Global Warming fantasy instead of producing projects) and bad regulatory policy (EPA war on coal et. al, Obamacare $5000 deductables) can suck up all Monetary Policy (stimulus, ZIRP) effects, and then some.

      There is only about 3% real growth in available technological gain per year MAX. Waste more than that with bad regulations and fiscal policy, you go into decline, monetary policy can’t stop it.

      (Yeah, I’m an Economist… don’t laugh, I’m not one of the loony ones 🙂

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  5. Euan Mearns says:

    Brent just set a new low of $42.21. Very, very shaky ground.

  6. carlos Leiro says:


    I introduce myself, I’m Carlos Leiro, and I like to read, I’m a curious person, I like to find out what happens in the world, and the issue of energy is essential in these times. I see you are knowledgeable. I read and Art Berman said in an interview:

    “The deep water producers they need $100 a barrel. The shale players, they need $100 a barrel. The tar sands guys, they need $100 a barrel. ”

    My question is whether it can sustain the society, whose economic basis is the continuous growth with higher oil prices to 100 dollars.

    From already thank you for your reply

  7. Willem Post says:

    You may be interested in this graph. It clearly shows a flattening of ACTUAL temperatures during the past 20 years.


  8. Dana Gardiner says:

    It appears to me that the glut we have today, 2-3 million barrels, is the smallest glut as a percentage of total consumption that we have ever had. That fact seems never to be mentioned. Given the Capex cutbacks by all the majors and the reductions in total rig counts, a turn around in the oil price should appear in 2016.

  9. Rob says:

    How long will it take to do some serious damage to oil industry for example really crush capacity of oil service companies. See lots of people leaving industry and once settled doing other things in no hurry to return to a extortionatly priced B&B in Aberdoom.

  10. Javier says:


    You no longer have that graph that showed world C+C with US tight oil and Canadian synth oil in different colors. I think it would be interesting to see it, because the trend appears to have changed and while conventional appears to be increasing, tight oil is decreasing and likely to experiment a drop of at least 1 Mbpd in 2016, with Canadian synth crude also falling in 2016.

    While unconventional led the increase in 2010-2015, it appears is also going to lead the decrease in 2015-

  11. Ofay Cat says:

    The graphics are very colorful …. what does any of this matter to a senior citizen on Vancouver Island? Or anyone who isn’t part of the energy sector or the Jihad.

  12. I see WTI in the $35’s as I write – 8.15am Saturday morning in Canberra. IMHO and in few words – this oil crash is mainly due to the Saudis keeping on pumping to weaken Iran.

    • Euan Mearns says:

      The one thing we think we know for sure is that over supply is down to Saudi and the inner circle of OPEC pumping flat out at a time when in the recent past they may have shown restraint. This coincides with every one else pumping eye balls out too.

      The motivation is less easy to understand. You can look at the range of casualties, some collateral damage. UK North Sea, US shale, Canada tar sands, Russia, all of OPEC, renewables that now look even more expensive, and Iran.

      Iran is a very interesting, non-Arab islamic country. Really advanced in many ways Saudi is not. I really don’t know enough to comment.

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  14. Aslangeo says:

    Interesting talk on oil markets – sourced from motley fool uk – I know nothing about the author but he seems compelling


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